Finance advisor concedes no bold breaks in budget, hopes to leave reform legacy

Amid predictable questions for sticking to a familiar script instead of ushering in sweeping reforms, Finance Advisor Salehuddin Ahmed has defended the 2025-26 budget as a pragmatic proposal for a politically delicate transition, insisting it sets a solid foundation for future reforms.

After unveiling budget a Tk 7.90 trillion, the first in Bangladesh’s history to be smaller than the previous year’s, Salehuddin acknowledged both the criticism and the constraints.

“Some say we’ve followed the old blueprint. That we didn’t make a revolutionary break. But that wasn’t possible,” he said during a post-budget press briefing on Tuesday.

“There is a degree of convention, yes. But it’s not devoid of innovation. We’ve taken some bold steps on taxation, and we’ve also tried to impose a degree of fiscal discipline,” he added.

Salehuddin was joined on stage by Planning Advisor Wahiduddin Mahmud, who echoed some of his sentiments.

While both advisors disagreed with parts of the criticism, they conceded that the budget was not radically different from previous ones.

The press briefing, held at 3pm at Dhaka’s Osmani Memorial Auditorium, also included Home Advisor Jahangir Alam Chowdhury, Power and Energy Advisor Fouzul Kabir Khan, and Commerce Advisor Sheikh Bashir Uddin.

Bangladesh Bank Governor Ahsan H Mansur, NBR Chairman Abdur Rahman Khan, Finance Secretary Khairuzzaman Mozumder, and Cabinet Secretary Sheikh Abdur Rashid also attended.

Although the interim government had the space to deliver sweeping reforms in a moment of political transition, Salehuddin argued that structural limitations and institutional continuity made such a shift unrealistic.

“We didn’t come to power, we took responsibility,” he reminded. “And we did so at a very difficult time. The country, many were saying, was in the ICU, standing at the edge of a cliff.”

Despite its reduced scale, the budget still projects ambitious targets: a 5.5 percent GDP growth rate, a 6.5 percent inflation target, and a revenue goal of Tk 5.64 trillion.

The deficit has been set at Tk 2.26 trillion, or 3.62 percent of GDP—the lowest in 14 years.

On the issue of legalising undisclosed money, the finance advisor hinted at possible action and promised adjustments in certain areas.

"Reforms will continue. We’ll do as much as we can, and leave our footprint for the next government to carry forward and implement."

Salehuddin also emphasised pragmatism over perfection.

“People have many expectations, but our primary goal was to make this budget realistic and implementable,” he said. “We believe it is both citizen-friendly and business-friendly.”

Advisor Wahiduddin noted that the budget would be finalised, with additions and subtractions, by Jun 22.

After nearly 30 minutes of remarks, the floor was opened to questions.

Although Salehuddin prepared to leave around 4:30pm, journalists requested more time.

He declined to take further questions, promising follow-up discussions later.

WHY FOLLOW THE PAST? PLANNING ADVISOR EXPLAINS

The Centre for Policy Dialogue (CPD) observes a “lack of alignment” between the reform commitments presented in the budget and the strategy outlined for its implementation.

Fahmida Khatun, the executive director of the private research organisation, pointed out that the current administration came to power following an anti-discrimination movement and its proposed budget speaks of reducing inequality across sectors, particularly in the financial sector.

She, however, said: “We don’t see coherence between that and the implementation strategy.”

The National Citizen Party (NCP), formed by the student leaders who led the anti-government uprising, believes the proposed budget falls short of delivering a “new arrangement”.

Other political parties, including the BNP and Jamaat-e-Islami, expressed their disappointment over the budget as well.

In response, Planning Advisor Wahiduddin addressed the criticism and explained why the interim government could not fully depart from past frameworks and establish a bold reform legacy.

“Many are saying this is a conventional budget, without any surprises. They don’t see any strategic or structural shift,” he said.

The advisor added, “The interim government promised an inequality-free Bangladesh, so expectations were that spending on education, health, and social protection would be prioritised.

“The question is, have we really done anything to reduce inequality? Have the numbers in this budget reflected that?”

Wahiduddin argued that a budget is part of an ongoing process, not something created from scratch.

“For instance, the current tax structure is filled with inconsistencies. Even if we try to fix one, another issue arises.”

He said a perfect tax system could only be designed from a clean slate. “But we are not in an ideal state. We have to make adjustments from within this existing setup.”

Like the budget speech, Tuesday’s press briefing also failed to outline how growth will jump from under 4 percent in the current fiscal year to 5.5 percent in the next.

No clear plan for increasing employment was revealed either--neither in the budget speech nor in the press conference.

The finance advisor avoided the subject, though finance secretary later said the government was “working on it”.

‘BLACK MONEY NOT A GOOD THING’

Despite the government’s pledge to reduce inequality, the proposed budget for the upcoming fiscal year allows undeclared income to be legalised through extra tax on flats, buildings and apartments.

This has drawn criticism and put the finance advisor under pressure.

At a post-budget discussion at Gulshan’s Lakeshore Hotel, the CPD warned the measure would deepen disparities between honest taxpayers and those regularising undisclosed income.

It also doubted the government would gain much revenue from the step.

Salehuddin admitted that permitting undeclared income in a budget focused on inequality is “far from ideal”.

“We’re not saying legalising black money is a good thing,” he said.

While hinting at the possibility of reconsidering the decision, the adviser also explained the “practical side” behind retaining the provision.

“Many ask why legalising black money was allowed,” he said. “Black money is not always completely illicit. What we mean is undeclared income. The provision applies only to flats.”

Salehuddin noted that legalising black money involves both moral concerns and practical considerations about potential tax revenue, and said both aspects will be weighed.

GOVERNOR OFFERS HOPE ON INFLATION

Salehuddin expects the new budget, if implemented effectively, to contain inflation within 6.5 percent while achieving 5.5 percent GDP growth.

Although economists remain cautious, Governor Mansur has offered a more optimistic outlook.

Still, the government will face challenges in controlling inflation, according to Fahmida.

She said the budget should prioritise stabilising the macroeconomy and reducing inflation with clear strategies and measures.

Data from the Bangladesh Bureau of Statistics (BBS) shows overall inflation fell to 9.05 percent in May, the lowest in 27 months.

Inflation was last lower in February 2023, at 8.87 percent, but has remained above 9 percent since then.

When asked how inflation might drop so rapidly, Mansur pointed to relief in the foreign exchange rate and stable or falling global prices of food, oil and gas.

“Prices in some cases will decline, which will have a positive impact,” he said. “Overall, we are hopeful inflation will fall below 7 percent by August or September.”

RECOVERING LAUNDERED FUNDS ‘NOT EASY’

Although the government has repeatedly promised to repatriate laundered money from abroad, Salehuddin admitted the process is far from simple.

He confirmed that the caretaker administration has begun tackling this difficult task.

“Those involved in money laundering are highly intelligent,” he said, in response to a question.

He added that 12 notable cases are currently under scrutiny, and while the process will take time, progress is being made. “We’ve said it may take a year or two. The process has started.

“If we had been able to recover black money, the budget would have required less support. We might not have needed to go to the IMF.”

Regrettably, he said, that opportunity has not been realised.

DEBT BURDEN GROWING HEAVIER

A large share of the proposed national budget is set to go towards servicing foreign and domestic debt obligations.

Wahiduddin outlined the government's strategy to break free from this “vicious cycle” of borrowing.

He regretted that due to mounting debt, the Muhammad Yunus government is unable to initiate its own development projects.

“A major portion of the budget is going into foreign and domestic debt repayment,” he said. “Alongside that, there are subsidies--especially in agriculture and energy--which we have had to maintain, as inflation was already high when we took office.”

The advisor added, “In some areas, like energy, we've fully paid off foreign dues, and now at least reached a stable footing.

“What we aim for is to get out of the trap of repaying debt with more debt. It won’t be solved in one budget, but we hope to at least initiate that shift.”

For the upcoming fiscal year, Tk 1.22 trillion has been allocated for interest payments, accounting for 15.5 percent of total spending.

REVENUE COLLECTION ‘A MAJOR CONCERN’

Despite narrowing the budget deficit in terms of GDP and overall size, Salehuddin has placed high hopes on revenue mobilisation--aiming to fund three-fourths of the proposed budget through revenue collection.

The target is set at Tk 5.64 trillion, which is 8–9 perecent higher than the revised revenue estimate of the outgoing fiscal year.

Of this, the NBR has been tasked with collecting Tk 4.99 trillion.

Analysts have raised doubts about the feasibility of this target since its announcement. In the post-budget briefing, the CPD flagged revenue collection as a key concern.

“Revenue collection has never matched projections,” said Fahmida. “It follows a consistent pattern, and this ambitious target is a major worry.”

The CPD sees no clear strategy for achieving such high collection, especially given ongoing unrest within the NBR.

Distinguished Fellow Mostafizur Rahman emphasised that unless the tax-to-GDP ratio surpasses 17 percent, the budget cannot deliver equity in society.

He recommended structural reforms, greater use of technology, and reducing reliance on VAT and indirect taxes.

Although Salehuddin mentioned some bold steps in his briefing, no government representative provided a concrete explanation of how the revenue target would be met.

Both the finance and planning advisors highlighted existing barriers to collection and stressed the need to increase dependence on direct taxes.

Explaining the additional tax burden on the middle class and businesses, Salehuddin said: “I wouldn’t call it a bad move. It would’ve been better if we had more resources, if we could collect more taxes, if tax and VAT evasion didn’t exist.

“If there was no corruption, and if we could repatriate laundered money, we wouldn’t need budgetary support from the IMF or World Bank. We could’ve funded the entire budget ourselves. That’s the real challenge,” he added.

[Writing in English by Shiekh Fariha Bristy]